IP-computers assembles computers in three countries (the US, China, and Malaysia). The production capacities of the three assembly plants are:

The company exports the computers to three other countries (Korea, Iran, and Ukraine). The demand at the different countries are:

The transportation cost in US$ per computer between the assembly facilities and the different countries are shown in the following table. Cells marked “NT” indicate that no trade exists between those two countries due to higher import/export taxes. For example, China does not trade with Korea. Therefore, Korean demand is met either from the US or from Malaysia or from both the US and Malaysia.

The company wants to determine the minimum cost of shipments to meet the demand requirements.
a. Formulate this problem as a linear programming model and solve it using computer.
b. IP-computers has estimated a shortage cost for each computer demanded but not supplied that reflects the loss of future sales and goodwill from the different countries as follows:

Resolve the problem by including the shortage cost in the calculations. Compute the total transportation cost and the total shortage cost.
c. IP-computers is considering expanding one of its facilities in order to meet the increasing demand for computers. The company has identified two alternatives: (1) expand the China facility to a capacity of 145; or (2) expand the Malaysia facility to a capacity of 170. The transportation costs will remain the same. Which option should the company select?

Transcribed Image Text:

Assembly Facility US China Malaysia Capacity (computers, in thousands) 150 100 125